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Glossary of IB Economics Terms

To excel in IB Economics, students need to have a good understanding of Economics Terminology. This is can be rather daunting for most students. In this page, we created a glossary of IB Economics terms to help students search for Economics definitions in just a few clicks. We hope you will find this tool useful.

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IB Economics Terms

A country is said to have an absolute advantage in the production of a good if it can produce more of it with the same resources.

Accelerator principle or theory

A theory of investment level determination where the level of investment depends on changes in national income. A (Keynesian school) explanation for the instability of investment in a market economy.

Accounting costs

Production costs for which a firm makes explicit monetary payments.

Actual and potential growth

Actual growth refers to increases in real GDP through time, potential growth refers to a shift outwards of the production possibilities boundary.

Ad valorem tax

An indirect tax expressed as a percentage of the price of a product, e.g. VAT

Aggregate demand

Total planned spending on domestically produced final goods and services in an economy over a period of time and consists of the sum of expenditure of households (consumers), firms, the government and foreign purchases of domestically produced goods and services, less spending by domestic residents on foreign made goods and services.

Aggregate supply

The total amount (quantity) of goods and services produced in an economy at different prices over a particular time period.

Allocative efficiency

Exists when ‘just the right amount’ from society’s point of view has been produced. It requires that, for the last unit produced, price to equal to its marginal cost.

Anti-dumping duties

Taxes (tariffs) that bring the import price of the good that is being dumped closer to the price charged by domestic firms in order to avoid injury to the domestic industry in the importing country.

Appreciation

An increase in the exchange rate within a flexible (floating) exchange rate regime